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Schlumberger 2018

2018 Schlumberger showed significant growth of revenue for the second successive year

Schlumberger was founded in 1926 and is the world’s leading provider of technology for reservoir characterization, drilling, production, and processing to the oil and gas industry. Schlumberger supplies the most comprehensive range of products and services, from exploration through to production, and integrated pore-to-pipeline solutions that optimize hydrocarbon recovery to deliver reservoir performance. In 2018 the company employed approximately 100,000 people from over 140 nationalities, operating in more than 85 countries. Schlumberger has executive offices in Paris, Houston, London and The Hague.

Schlumberger operates in four segments: Reservoir Characterization, Drilling, Production, and Cameron. Reservoir Characterization consists of the principal Technologies involved in finding and defining hydrocarbon resources. Drilling consists of the principal Technologies involved in the drilling and positioning of oil and gas wells. Production consists of the principal Technologies involved in the lifetime production of oil and gas reservoirs. Cameron consists of the principal Technologies involved in pressure and flow control for drilling and intervention rigs, oil and gas wells and production facilities.
According to the company´s Annual Report Schlumberger full year 2018 revenue of $32.8 billion increased by 8% from $30.4 billion in 2017 and grew for the second successive year. In 2016 the company recorded revenues of $27.8 billion. This revenue growth was driven almost entirely by increased activity in North America against a backdrop of increasing oil prices throughout most of the year.  Revenue in North America in 2018, 2017 and 2016 was $12 billion, $9.5 billion and $6.7 billion, respectively.

In the oil markets, sentiment was stable and positive for the first three quarters of 2018. Production cuts from OPEC and Russia in 2017 served to strengthen the oil price. Activity picked up globally and, as oil reached its peak price for the year in October, production from major producers, including unconventional US production, began to grow. As a result, the market became oversupplied at the beginning of the fourth quarter and this caused oil prices to plummet by more than 40% during the fourth quarter of 2018 and led to a sharp decrease in US land well completion activity during the final months of the year.

In the natural gas markets, consumption of liquefied natural gas (“LNG”) continued to rise. US export capacity grew to 37 million tonnes in 2018, and is set to nearly double in 2019. Underground gas storage in the US was below average through most of 2018, however, rising gas production from unconventional oil and gas wells in the US Northeast, Midcontinent and the Permian Basin helped to keep prices well below international prices. This will allow the US to join Australia and the Middle East as significant exporters.

Schlumberger financial performance in 2018 was driven largely by North America, where revenue of $12.0 billion grew 26% year-on-year, despite the fall-off in activity during the 4th quarter of the year. This growth was driven by increased land activity and due to the OneStim business, which grew by 41%. Full-year 2018 international revenue of $20.4 billion was flat compared with 2017.  During the 3rd quarter of 2018, international revenue grew faster than North America revenue for the first time since 2014, marking the beginning of a trend of positive activity after three consecutive years of declining revenue. This was driven by the increased activity of national oil companies, as they began to invest in longer-term resource development.

Full-year 2018 pre-tax operating income amounted to $4.2 billion and grew by 7% year-on-year. Pre-tax operating margin of 13% was flat compared with the previous year.

Segmentally, the full-year 2018 revenue for Reservoir Characterization amounted to $6.5 billion and decreased by 4% compared to $6.8 billion in 2017, due to reduced OneSurface revenue following the end of the project in the Middle East and reduced WesternGeco activity as marine seismic acquisition contracts fell down during 2018. The pre-tax operating margin increased from 18% in 2017 to 21% in 2018 as a result of reduced depreciation and amortization.

Full-year 2018 revenue for Drilling amounted to $9.3 billion and increased by 10% compared to $8.4 billion in 2017, due to higher demand for directional drilling technologies on land in North America and internationally. Year-on-year, pre-tax operating margin declined from 14% in 2017 to 13% in 2018.

Full-year 2018 revenue for Production amounted to $12.4 billion and increased by 17% compared to $10.6 billion in 2017. In 2017 the company recorded another revenue increase of 21% from $8.8 billion in 2016 to $10.6 billion in 2017, due to the accelerated land activity growth in North America. Year-on-year, pre-tax operating margin declined from 9% in 2017 to 8% in 2018. 

Full-year 2018 revenue for Cameron amounted to $5.2 billion and decreased 1% compared to 2017. Year-on-year, pre-tax operating margin declined from 14% in 2017 to 12% in 2018, due to the decline in high-margin OneSubsea project volumes.

Research & engineering expenses, as a percentage of Revenue, were 2.1% or $702 million in 2018 compared to 2.6% or $787 million in 2017, and 3.6% or $1,020 million in 2016.

Schlumberger had a total Cash figure of $2.8 billion, $5.1 billion and $9.5 billion on December 31, 2018, 2017 and 2016, respectively.  

Total debt was $16.1 billion, $18.2 billion and $19.6 billion on December 31, 2018, 2017 and 2016, respectively.

Cash flow from operations was $5.7 billion in 2018, $5.7 billion in 2017 and $6.3 billion in 2016.  The decrease in operating cash flows in 2017, as compared to 2016, was attributable to lower earnings.

Dividends paid during 2018, 2017 and 2016 were $2.8 billion, $2.8 billion and $2.6 billion, respectively.

Looking ahead to 2019, Schlumberger expects a more positive supply and demand balance sentiment to lead to a gradual recovery in the price of oil over the course of the year, as the OPEC and Russia production cuts take full effect; the effect of lower activity in North America land in the second half of 2018 impacts production growth; the dispensations from the Iran export sanctions expire and are not renewed; and as the US and China continue to work toward a solution to their ongoing trade dispute.